1. Establishment of This Plan. Dril-Quip,
Inc., a Delaware corporation (the “Company”), established the 2004 Incentive
Plan of Dril-Quip, Inc. (this “Plan”) on March 18, 2004 subject to stockholder
approval as provided in Paragraph 18. References in this Plan to “Paragraphs”
are to Paragraphs of this Plan.

2. Definitions. As used
in this Plan, the following terms have the following respective meanings:

“Annual
Meeting” means the annual meeting of the stockholders of the Company, which is
held pursuant to Section 211(b) of the Delaware General Corporation Law.

“Authorized
Officer” means any Chairman of the Board (or any other senior officer of the
Company to whom any Chairman of the Board delegates, by written notice to the
Committee of that delegation, authority to execute any Award Agreement).

“Award”
means an Employee Award.

“Award
Agreement” means any Employee Award Agreement.

“Board”
means the Board of Directors of the Company.

“Cash
Award” means an award denominated in cash.

“Code”
means the Internal Revenue Code of 1986, as amended from time to time.

“Committee”
means the Committee of the Board designated by the Board, which shall initially
be the Compensation Committee of the Board, consisting of at least two
nonemployee members of the Board.

“Common
Stock” means the Common Stock, par value $0.01 per share, of the Company.

“Company”
means Dril-Quip, Inc., a Delaware corporation.

“Director”
means an individual serving as a member of the Board.

“Dividend
Equivalents” means, with respect to shares of Restricted Stock, an amount equal
to all dividends and other distributions (or the economic equivalent thereof)
that are payable to stockholders of record during the Restriction Period
applicable to those shares on a like number of shares of Common Stock.

“Employee”
means any salaried employee of the Company or any of its Subsidiaries.

“Employee
Award” means the grant under this Plan of any Option, SAR, Stock Award, Cash
Award or Performance Award, whether granted singly or in combination or tandem
with any other Award, to a Participant who is an Employee on such terms and
subject to such conditions and limitations as the Committee may establish
consistent with the terms of this Plan.

“Employee
Award Agreement” means a written agreement between the Company and a
Participant who is an Employee that sets forth the terms, conditions and limitations
applicable to an Employee Award granted to that Employee.

“Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time.

“Fair
Market Value” of a share of Common Stock means, as of a particular date, (i) if
shares of Common Stock are listed on a national securities exchange, the
closing price per share of Common Stock on

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the consolidated
transaction reporting system for the principal national securities exchange on
which shares of Common Stock are listed on that date or, if there shall have
been no such sale so reported on that date, on the last preceding date on which
such a sale was so reported, (ii) if shares of Common Stock are not so listed,
but are quoted on the consolidated transaction reporting system for The Nasdaq
Stock Market, Inc., the closing price per share of Common Stock reported by the
consolidated transaction reporting system for The Nasdaq National Market on
that date or, if there shall have been no such sale so reported on that date,
on the last preceding date on which such a sale was so reported, (iii) if the
Common Stock is not so listed or quoted, the closing bid price on that date or,
if there are no quotations available for that date, on the last preceding date
for which those quotations are available, as reported by The Nasdaq Stock
Market, Inc. or, if not reported by The Nasdaq Stock Market, Inc., by the
National Quotation Bureau Incorporated or (iv) if shares of Common Stock are
not publicly traded, the most recent value determined by an independent
appraiser appointed by the Company for that purpose.

“Incentive
Option” means an Option that is intended to comply with the requirements set
forth in Section 422 of the Code.

“Nonqualified
Stock Option” means an Option that is not an Incentive Option.

“Option”
means a right to purchase a specified number of shares of Common Stock at a
specified price.

“Participant”
means an Employee to whom an Award has been made under this Plan.

“Performance
Award” means an award made pursuant to this Plan to a Participant who is an
Employee, the earning of which is subject to the attainment of one or more
Performance Goals.

“Performance
Goal” means a standard established by the Committee to determine in whole or in
part whether a Performance Award will be earned.

“Prior
Plan” means the 1997 Incentive Plan of Dril-Quip, Inc. as established September
19, 1997 and amended as of March 16, 2001.

“Restricted
Stock” means any Common Stock that has its transfer restricted or that is
subject to forfeiture provisions as provided in the Award Agreement relating
thereto.

“Restriction
Period” means a period of time beginning as of the effective date as of which
an Award of Restricted Stock is made pursuant to this Plan and ending as of the
date on which the Common Stock subject to that Award is no longer restricted as
to its transfer or subject to forfeiture provisions.

“SAR”
means a right to receive a payment, in cash or Common Stock, equal to the
excess of the Fair Market Value or other specified valuation of a specified
number of shares of Common Stock on the date the right is exercised over a
specified strike price, in each case, as determined by the Committee.

“Stock
Award” means an award in the form of shares of Common Stock or units
denominated in shares of Common Stock.

“Subsidiary”
means (i) in the case of a corporation, any corporation of which the Company
directly or indirectly owns shares representing more than 50% of the combined
voting power of the shares of all classes or series of capital stock of that
corporation that have the right to vote generally on matters submitted to a
vote of the stockholders of that corporation and (ii) in the case of a
partnership or other business entity not organized as a corporation, any such
business entity of which the Company directly or indirectly owns more than 50%
of the voting, capital or profits interests (whether in the form of partnership
interests, membership interests or otherwise).

3. Objectives. The
Company has designed this Plan (i) to attract and retain key Employees, (ii) to
encourage the sense of proprietorship of these persons in the Company and (iii)
to stimulate the active interest of these persons in the development and
financial success of the Company and its Subsidiaries by making Awards under
this Plan.

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4. Eligibility. Key
Employees eligible for Employee Awards are those assigned or to be assigned
positions of responsibility and whose performance, in the judgment of the Committee,
can have a significant effect on the success of the Company and its
Subsidiaries.

5. Common Stock Available for Awards. Subject
to the provisions of paragraph 15 hereof, there shall be available for Awards
under this Plan granted wholly or partly in Common Stock (including rights or
options that may be exercised for or settled in Common Stock) an aggregate of
1,348,147 shares of Common Stock. No more than 1,348,147 shares of Common Stock
will be used for Awards of Incentive Options. The number of shares of Common
Stock that are the subject of Awards under this Plan or the Prior Plan which
are forfeited or terminated, expire unexercised, are settled in cash in lieu of
Common Stock or in a manner such that all or some of the shares covered thereby
are not issued to a Participant or are exchanged for a consideration that does
not involve Common Stock will again immediately become available for Awards
hereunder. The Committee may from time to time adopt and observe such
procedures concerning the counting of shares against the Plan maximum as it may
deem appropriate. The Board and the appropriate officers of the Company will
from time to time take whatever actions are necessary to file any required
documents with governmental authorities, stock exchanges and transaction
reporting systems to ensure that shares of Common Stock are available for
issuance pursuant to Awards.

6. Administration.

(a)
The Committee will administer this Plan.

(b)
Subject to the provisions hereof, the Committee will have full and exclusive
power and authority to administer this Plan and to take all actions that are
specifically contemplated hereby or are necessary or appropriate in connection
with the administration hereof. The Committee also will have full and exclusive
power to interpret this Plan and to adopt such rules, regulations and
guidelines for carrying out this Plan as it may deem necessary or proper, all
of which powers will be exercised in the best interests of the Company and in
keeping with the objectives of this Plan. The Committee may, in its discretion,
provide for the extension of the exercisability of any Employee Award,
accelerate the vesting or exercisability of any Employee Award, eliminate or
make less restrictive any restrictions contained in any Employee Award, waive
any restriction or other provision of this Plan or any Employee Award or
otherwise amend or modify any Employee Award in any manner that is either (i)
not adverse to the Participant to whom that Employee Award was granted or (ii)
consented to in writing by that Participant; provided that the exercise price
of an outstanding Option will not be reduced without approval of the
stockholders of the Company. The Committee may grant an Employee Award to any
individual who has agreed in writing to become an Employee within six months
after the date of that agreement, provided that the effectiveness of that Award
will be subject to the condition that the individual actually becomes an
Employee within that time period. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in this Plan or in any
Employee Award in the manner and to the extent the Committee deems necessary or
desirable to further the purposes of this Plan. Any decision of the Committee
in the interpretation and administration of this Plan will lie within its sole
and absolute discretion and will be final, conclusive and binding on all
parties concerned.

(c) No
member of the Committee or officer of the Company to whom the Committee has
delegated authority in accordance with the provisions of paragraph 7 of this
Plan will be liable for anything done or omitted to be done by him or her, by
any member of the Committee or by any officer of the Company in connection with
the performance of any duties under this Plan, except for his or her own
willful misconduct or as expressly provided by statute.

7. Delegation of Authority. The
Committee may delegate to any Chairman of the Board and to other senior
officers of the Company its duties under this Plan on such terms and subject to
such conditions or limitations as the Committee may establish, except that the
Committee may not delegate to any person the authority to grant Awards to, or
take other action with respect to, Employee Participants who are subject to
Section 16 of the Exchange Act.

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8. Employee Awards.

(a)
The Committee will determine the type or types of Employee Awards to be made
and will designate from time to time the Employees who are to receive Employee
Awards. Each Employee Award will be evidenced by an Employee Award Agreement
containing such terms, conditions and limitations as the Committee determines
in its sole discretion and signed by the Participant to whom the Employee Award
is made and by an Authorized Officer for and on behalf of the Company. Employee
Awards may consist of those listed in this paragraph 8(a) hereof and may be
granted singly or in combination or tandem with other Employee Awards. Employee
Awards also may be made in combination or tandem with, in replacement of or as
alternatives to grants or rights under this Plan or any other employee plan of
the Company or any of its Subsidiaries, including the plan of any acquired
entity. No option may be granted in exchange or in replacement of an option
having a higher exercise price. An Employee Award may provide for the grant or
issuance of additional, replacement or alternative Employee Awards upon the
occurrence of specified events, including the exercise of the original Employee
Award granted to a Participant. All or part of an Employee Award may be subject
to conditions established by the Committee, which may include, but are not
limited to, continuous service with the Company and its Subsidiaries,
achievement of specific business objectives, increases in specified indices,
attainment of specified growth rates and other comparable measurements of
performance. If a Participant holding an Employee Award ceases to be an
Employee, any unexercised, deferred, unexercisable, unvested or unpaid portion
of that Employee Award will be treated as set forth in the applicable Employee
Award Agreement.

(i) Stock
Option. An Employee Award may be in the form of an
Option. An Option awarded pursuant to this Plan may consist of an Incentive
Option or a Nonqualified Option. The price at which any share of Common Stock
may be purchased on the exercise of any Option will not be less than the Fair
Market Value of a share of the Common Stock on the date of grant of that
Option, and the Committee will determine the other terms, conditions and
limitations applicable to each Option, including its term and the date or dates
on which it becomes exercisable.

(ii) Stock
Appreciation Right. An Employee Award may be in the
form of a SAR. The Committee will determine the terms, conditions and
limitations applicable to each SAR awarded pursuant to this Plan, including its
term and the date or dates on which it becomes exercisable.

(iii) Stock
Award. An Employee Award may be in the form of a
Stock Award. The Committee will determine the terms, conditions and limitations
applicable to each Stock Award granted pursuant to this Plan.

(iv) Cash
Award. An Employee Award may be in the form of a
Cash Award. The Committee will determine the terms, conditions and limitations
applicable to each Cash Award granted pursuant to this Plan.

(v) Performance
Award. Without limiting the type or number of
Employee Awards that may be made under the other provisions of this Plan, an
Employee Award may be in the form of a Performance Award. A Performance Award
will be paid, vested or otherwise deliverable solely on account of the
attainment of one or more pre-established, objective Performance Goals
established by the Committee prior to the earlier to occur of (x) 90 days after
the commencement of the period of service to which the Performance Goal relates
or (y) the lapse of 25% of the period of service (as scheduled in good faith at
the time the goal is established) and, in any event, while the outcome is
substantially uncertain. A Performance Goal is objective if a third party
having knowledge of the relevant facts could determine whether the goal is met.
A Performance Goal may be based on one or more business criteria, including,
but not limited to, those that apply to the individual, one or more lines or
classes of products or services of the Company, one or more business divisions,
groups or units of the Company or the Company as a whole and may include one or
more of the following: increased revenue, net income, stock price, market
share, earnings per share, return on equity, return on assets or decrease in
costs. Unless otherwise stated, a Performance Goal need not be based on an
increase or positive result under a particular business criterion and could
include, for example, maintaining the status quo or limiting

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economic losses
(measured, in each case, by reference to specific business criteria). In
interpreting Plan provisions applicable to Performance Goals and Performance
Awards, it is the intent of this Plan to conform with the standards of Section
162(m) of the Code and Treasury Regulation § 1.162-27(e)(2)(i) or any successor
law or regulation, and the Committee in establishing such goals and
interpreting the Plan will be guided by those provisions. Prior to the payment
of any compensation based on the achievement of Performance Goals, the
Committee must certify in writing that the applicable Performance Goals were,
in fact, satisfied. Subject to the foregoing provisions, the Committee will
determine the terms, conditions and limitations applicable to Performance
Awards.

(b)
Notwithstanding anything to the contrary contained in this Plan, the following
limitations will apply to each Employee Award:

(i) no
Participant may be granted, during any one-year period, Employee Awards
consisting of Options or SARs that are exercisable for more than 300,000 shares
of Common Stock;

(ii)
no Participant may be granted, during any one-year period, Stock Awards
covering or relating to more than 10,000 shares of Common Stock (the limitation
set forth in this clause (ii), together with the limitation set forth in clause
(i) above, being hereinafter collectively referred to as the “Stock-based
Awards Limitations”); and

(iii)
no Participant may be granted Employee Awards consisting of cash or in any
other form permitted under this Plan (other than Employee Awards consisting of
Options or SARs or otherwise consisting of shares of Common Stock or units
denominated in such shares) in respect of any one-year period having a value
determined on the date of grant in excess of $1,000,000.

9. Payment of Awards.

(a) General. Payment
of Employee Awards may be made in the form of cash or Common Stock, or a
combination thereof, and may include such restrictions as the Committee may
determine, including, in the case of Common Stock, restrictions on transfer and
forfeiture provisions. If payment of an Employee Award is made in the form of
shares of Restricted Stock, the applicable Award Agreement relating to those
shares will specify whether they are to be issued at the beginning or end of
their Restriction Period. If shares of Restricted Stock are to be issued at the
beginning of their Restriction Period, the certificates evidencing those shares
(to the extent that those shares are so evidenced) will contain appropriate
legends and restrictions that describe the terms and conditions of the
restrictions applicable thereto. If shares of Restricted Stock are to be issued
at the end of their Restricted Period, the right to receive those shares will
be evidenced by book entry registration or in such other manner as the
Committee may determine.

(b) Deferral. With
the approval of the Committee, amounts payable in respect of Employee Awards
may be deferred and paid either in the form of installments or as a lump-sum
payment. The Committee may permit selected Participants to elect to defer
payments of some or all types of Employee Awards in accordance with procedures
the Committee establishes. Any deferred payment of an Employee Award, whether
elected by the Participant or specified by the applicable Award Agreement or by
the Committee, may be forfeited if and to the extent that the applicable Award
Agreement so provides.

(c) Dividends
and Interest. Rights to dividends or Dividend
Equivalents may be extended to and made part of any Employee Award consisting
of shares of Common Stock or units denominated in shares of Common Stock,
subject to such terms, conditions and restrictions as the Committee may
establish. The Committee also may establish rules and procedures for the
crediting of interest on deferred cash payments and Dividend Equivalents for
Employee Awards consisting of shares of Common Stock or units denominated in
shares of Common Stock.

(d) Substitution
of Awards. At the discretion of the Committee, a
Participant who is an Employee may be offered an election to substitute any
Employee Award for another Employee Award or Awards of the same or a different
type.

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10. Stock Option Exercise. The
price at which shares of Common Stock may be purchased under an Option will be
paid in full at the time of exercise in cash or, if elected by the optionee,
the optionee may purchase those shares by means of tendering Common Stock or
surrendering another Award, including shares of Restricted Stock, valued at
their Fair Market Value per share on the date of exercise or any combination
thereof. The Committee will determine acceptable methods for Participants who
are Employees to tender Common Stock or other Employee Awards; provided, that
any Common Stock that is or was the subject of an Employee Award may be so
tendered only if it has been held by the Participant for six months. The
Committee may provide for procedures to permit the exercise or purchase of
Employee Awards by use of the proceeds to be received from the sale of Common
Stock issuable pursuant to an Employee Award. Unless otherwise provided in the
applicable Award Agreement, if shares of Restricted Stock are tendered as
consideration for the exercise of an Option, the number of the shares issued on
the exercise of the Option that equals the number of shares of Restricted Stock
used as consideration therefor will be subject to the same restrictions as the
Restricted Stock so submitted as well as to any additional restrictions the
Committee may impose.

11. Taxes. The Company
will have the right to deduct applicable taxes from any Employee Award payment
and withhold, at the time of delivery or vesting of cash or shares of Common
Stock under this Plan or at the time otherwise required by applicable law, an
appropriate amount of cash or number of shares of Common Stock or a combination
thereof for payment of taxes required by law or to take such other action as
may be necessary in the opinion of the Company to satisfy all obligations for
withholding of those taxes. The Committee may permit withholding to be
satisfied by the transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Employee Award with respect to which withholding is
required. If shares of Common Stock are used to satisfy tax withholding, those
shares will be valued at their Fair Market Value per share when the tax
withholding is required to be made. The Committee may provide for loans, on
either a short-term or demand basis, from the Company to a Participant who is
an Employee to permit the payment of taxes required by law.

12. Amendment, Modification, Suspension or
Termination. The Board may amend, modify, suspend or
terminate this Plan for the purpose of meeting or addressing any changes in
legal requirements or for any other purpose permitted by law, except that (i)
no amendment or alteration that would adversely affect the rights of any
Participant under any Award previously granted to that Participant will be made
without the consent of that Participant and (ii) no amendment or alteration
shall be effective prior to its approval by the stockholders of the Company to
the extent such approval is required by applicable legal requirements or the
applicable requirements of the securities exchange on which the Common Stock is
listed.

13. Assignability. Unless
otherwise determined by the Committee and provided in the applicable Award
Agreement, no Award or any other benefit under this Plan will be assignable or
otherwise transferable except by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder. The Committee may prescribe and include in any Award
Agreement other restrictions on transfer. Any attempted assignment of an Award
or any other benefit under this Plan in violation of this Paragraph 13 will be
null and void.

14. Adjustments.

(a)
The existence of outstanding Awards will not affect in any manner the right or
power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the capital
stock of the Company or its business or any merger or consolidation of the
Company, or any issue of bonds, debentures, preferred or other stock (whether
or not that issue is prior to, on a parity with or junior to the Common Stock)
or the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or
proceeding of any kind, whether or not of a character similar to that of the
acts or proceedings enumerated above.

(b) If
any subdivision, split or combination of outstanding shares of Common Stock or
any declaration of a dividend payable in shares of Common Stock occurs, then,
except with respect to the Awards

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outstanding immediately
prior to the Closing Date and consisting of Options, (i) the number of shares
of Common Stock reserved under this Plan, (ii) the number of shares of Common
Stock covered by outstanding Awards in the form of Common Stock or units
denominated in Common Stock, (iii) the exercise or other price in respect of
such Awards, (iv) the appropriate Fair Market Value and other price
determinations for such Awards and (v) the Stock-based Awards Limitations each
will be proportionately adjusted by the Board to reflect the consequences of
that occurrence. If any recapitalization or capital reorganization of the
Company, any consolidation or merger of the Company with another corporation or
entity, any adoption by the Company of any plan of exchange affecting the
Common Stock or any distribution to holders of Common Stock of securities or
property (other than normal cash dividends) occurs, the Board will make
appropriate adjustments to the amounts or other items referred to in clauses
(ii), (iii), (iv) and (v) of the preceding sentence to give effect to that
transaction; provided, that such adjustments will be only those as are
necessary to maintain the proportionate interest of the holders of the Awards
and preserve, without exceeding, the value of those Awards. In the event of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Committee will be authorized to issue or
assume Awards by means of substitution of new Awards, as appropriate, for
previously issued Awards or to assume previously issued Awards as part of such
adjustment.

15. Restrictions. No
Common Stock or other form of payment will be issued with respect to any Award
unless the Company is satisfied, on the basis of advice of its counsel, that
the issuance will comply with applicable federal and state securities laws.
Certificates evidencing shares of Common Stock delivered under this Plan (to
the extent that the shares are so evidenced) may be subject to such
stop-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any securities exchange or transaction reporting system on
which the Common Stock is then listed or to which it is admitted for quotation
and any applicable federal or state securities law. The Committee may cause a
legend or legends to be placed upon those certificates (if any) to make
appropriate reference to those restrictions.

16. Unfunded Plan. Insofar
as it provides for Awards of cash, Common Stock or rights thereto, this Plan
will be unfunded. Although bookkeeping accounts may be established with respect
to Participants who are entitled to cash, Common Stock or rights thereto under
this Plan, any such accounts will be used merely as a bookkeeping convenience.
The Company will not be required to segregate any assets that may at any time
be represented by cash, Common Stock or rights thereto, nor will this Plan be
construed as providing for that segregation, nor shall the Company, the Board
or the Committee be deemed to be a trustee of any cash, Common Stock or rights
thereto to be granted under this Plan. Any liability or obligation of the
Company to any Participant with respect to an Award of cash, Common Stock or
rights thereto under this Plan shall be based solely on any contractual
obligations that may be created by this Plan and any Award Agreement, and no
such liability or obligation of the Company will be deemed to be secured by any
pledge or other encumbrance on any property of the Company. Neither the Company
nor the Board nor the Committee will be required to give any security or bond
for the performance of any obligation that may be created by this Plan.

17. Governing Law. This
Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by mandatory provisions of the Code or the
securities laws of the United States, will be governed by and construed in accordance with
the laws of the State of Delaware.

18. Effectiveness; Term. The
Plan was established by the Board of Directors effective as of March 18, 2004 subject to the approval of the stockholders at the
2004 Annual Meeting. No Awards shall be made after the tenth anniversary of the
date that stockholders approve the Plan.